Building Your IP Strategy for Patent-Intensive Tech Startups – Part 4: IP Mapping

This is the last in a four-part blog series on how to build an IP strategy for patent-intensive tech startups. (Read Part One: Existing IP, Part Two: Future IP, and Part Three: IP Management.)

As you know from the previous posts, your IP strategy is your company’s plan for protecting and managing its intangible assets. Having a plan in place early ensures that you know what resources, personnel and expertise you need to acquire as you ramp up your business.

For a patent-intensive tech startup, it’s important to have an IP strategy before you start fundraising. That way, you have a well-developed IP section in your pitch deck, and you’re prepared for questions from prospective investors.

Here, in the final post of this series, we turn to the visionary part of your IP strategy—mapping your IP to your business plan. In the previous sections, we have talked about how you will obtain IP protection and what it will cover. Here, we explore how your business will use IP protection.

As we’ve said, IP protection is the legal structure that transforms your sweat equity into a business asset. In the final part of your IP strategy, you will describe how to leverage this business asset to serve your company’s mission.

In the discussion below, we’ll also return to our fictitious example of SmartOStat, Inc. (which is developing a smart home thermostat) to illustrate how each step works.

1. Where will you pursue IP protection geographically?

IP protection is territorial, meaning that the IP protection you secure in one country generally does not apply in other countries. For example, a U.S. patent gives you exclusive rights in the U.S. only; those rights don’t extend to Europe or Asia. So you have to seek legal protection in each individual jurisdiction where you want to enforce IP rights.

Keep in mind that, even for large companies with big budgets, it’s often not practical to cover every country. Although you can file an international patent application, there’s no such thing as an international patent. For patents and other forms of IP, international filings simply serve as a placeholder, to defer the cost of filing “national stage” applications in individual countries. Please see our earlier post for more detail on the international patent filing process.

For purposes of developing an IP strategy, you need to identify where you will want to seek IP protection (for the “future IP” discussed in our earlier post). Keep in mind that each individual country can add significantly to the cost, so you should be selective to avoid wasteful spending.

Many companies take a tiered approach. First, identify a list of core countries where IP protection is most important, and plan to pursue protection for all your IP in those countries. Then, make a list of secondary countries where IP protection could add value but will be less critical, and plan to file only your most important IP in those countries.

We recommend focusing on markets where you and your direct competitors have operations or direct business interests. As a secondary consideration, think about what will make your IP portfolio most valuable in an exit scenario; for example, if your company might be acquired by a larger company someday, take a look at where that company has IP protection.  

As such, consider filing in countries or regions where:

• You or your competitors have business or manufacturing operations
• You or your competitors have customers or users
• Larger tech companies in your space are filing patent applications

We’ve written more extensively about the factors to consider when crafting an international patent strategy — make sure to check that out for more detail!

You might be tempted to put this off and think about these types of decisions later, when you’re actually filing a patent application. But there’s a lot of value in mapping this out much earlier in the life of your company. For one thing, you’ll need to set an appropriate budget long before you’re filing patent applications, so you need to plan ahead. Perhaps more importantly, the geographic aspects of your IP strategy can impact other important decisions, like who to have on your IP committee, which law firms to engage, and which inventions will be patented. There’s a lot of value in early planning here!

Sample answer: SmartOStat, Inc.’s approach

SmartOStat, Inc. will prioritize IP protection in our primary early markets: the U.S., Germany, France and the UK.

We will also consider protection in Japan, which is the headquarters location of Sato Technologies (the market leader in thermostats).

Sato is also a potential acquirer or licensee, so we will consider expanding IP protection to their other key markets, which includes most of Asia. Sato consistently flies patent applications in China, U.S., and Europe.

2. What purpose will IP serve in your business plan?

When we’re working with a new client, one of the first questions I often ask is, “Why do you want to file a patent application?” You might be surprised by the wide range of answers we get – this is because there are so many different ways that patents can add value for a company.

Here are some of the legitimate reasons that companies are filing patent applications:

• We need patents to get a market edge over our competitors
• We need defensive patents, to prevent someone else from blocking us out of the space
• We want to show our customers that our product really is unique and innovative
• Our investors insisted that we pursue IP protection
• We plan to license out our technology, and patents will be a primary vehicle for that
• We don’t want competitors to steal or copy our technology
• We have a litigious competitor, and we need to be armed for battle

The list goes on. The point here is, there are many different ways that IP protection can serve your business, and you should understand all the possible avenues upfront. The more you understand about how your business will use IP protection, the better decisions you’ll make about procuring IP protection.

High-tech startups with finite resources have to make smart decisions about what IP they should protect, and when — or risk wasting precious time and money on investments with low returns. To that end, your IP strategy needs to be mapped to your business goals.

If your goal is to be armed for a legal battle with a major player in the industry, your IP filings should prevent design arounds, and account for how other companies might implement your invention in their own products. By contrast, if your goal is only to prevent exact copying of your product, then your patent filings can be more narrowly focused on the details of how the invention is implemented in your product.

Again, it’s smart to think through this early in the life of your company, so that you can budget accordingly and seek the right personnel to execute your IP strategy.

 Sample answer: SmartOStat, Inc.’s approach

We will use patent protection to prevent competitors from copying our sensors and the design of our thermostat device. This will give us an exclusive market for selling our hardware at a premium price.

We will use trade secret protection to ensure that our proprietary learning algorithms (deployed in the cloud) are not stolen by competitors. The superior service will promote brand loyalty and user retention.

We will consider a monthly (or annual) subscription fee for advanced software features that might be deployed in the smartphone app or the thermostat device itself.

We will investigate opportunities to license our IP to the automotive industry.

3. Are there aspects of your technology that could be useful in other industries or for other applications (outside your business plan)?

Your business could potentially generate revenue by licensing its intellectual property to other companies. Licensing grants another business or entity the right to use your protected technology, typically in exchange for royalty payments or other remuneration.

In the previous question, we had mentioned the possibility of identifying licensing opportunities directly related to your business plan. Aside from generating revenue, licensing can also help you establish symbiotic collaborations with similar businesses.

As a next step, consider opportunities for licensing your technology to businesses in unrelated fields. This has the added benefit of diversifying your revenue streams, increasing your access to other markets, and reducing your risk (as you are not directly investing in the other company’s technology).

It’s important to think long term, so that you can structure your IP portfolio to support the licensing strategy that you envision for the future. If you plan to license your technology in other industries, your patent filings should describe how the invention can be adapted to a broad range of technologies, and you might want to claim specific types of products that can embody the invention. In some cases, you might file different patent applications for different commercial applications of an invention, to support a robust licensing campaign. However, this requires additional work and expense upfront, which you’ll want to avoid if you don’t plan to license your IP into other industries.

Sample answer: SmartOStat Inc.’s approach

Our sensor technology and learning platform could be adapted for the automobile industry. SmartOStat, Inc. currently does not plan to develop its technology for auto, but we will seek out licensing partnerships with auto brands, initially focusing on EVs.

Our learning technology can also be deployed on data from other types of in-home smart devices. We will explore opportunities to license our learning software to brands selling other types of smart electronics.

Finding the right legal partnership

Building a strong IP strategy is essential to protecting your assets and achieving your business goals. However, it’s also not a one-and-done affair: as your business grows and evolves, you should periodically revise your strategy to follow suit.

A strong legal partner can help you navigate the IP landscape and chart the best path forward for your business. At Henry Patent Law Firm, we’re well-versed with helping high-tech startups craft smart IP strategies tailored to their specific business needs. If you have any questions, don’t hesitate to get in touch!